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2nd Year, Block A
G.R. No. 174214

June 13, 2012

Herein respondents were hired for Club Waterfront, a division under petitioner Waterfront Cebu City Hotel which
catered to foreign high stakes gamblers for different positions. On 12 May 2003, respondents, along with 41
other employees, received identical letters of termination from petitioner Director of Human Resources
informing them of the temporary suspension of business of the Club. The following day, petitioner served the
notice of suspension of business with the DOLE). The dismissed employees were offered separation pay
equivalent to half-month pay for every year of service. The Club closure took effect on 15 June 2003. On 26
June 2003, respondents filed a complaint before the Labor Arbiter for illegal dismissal, illegal suspension, and
non-payment of salaries and other monetary benefits. They likewise prayed for damages and attorney fees.
Whether or not the evidence of losses and closure of Club Waterfront is immaterial and irrelevant to the
termination of petitioners?
The ruling of the Court of Appeals is reversed and set aside. At the outset, it should be stated that the
respondents cannot be accommodated in other departments of the Hotel. The duties and functions they
perform are peculiar to the positions they hold in the Club. It is likewise undisputed that the Club remained
closed and there is no other department in the Hotel similar to the Club and which catered to foreign high
stakes gamblers. Verily, reinstatement cannot be and could not have been an option for petitioner Hotel. A
review of the consolidated financial statement proves petitioner assertion that the losses there reflected refer
to the losses of the Club. The consolidated financial statement and the corporate relationships it indicates,
cannot, however, be relied upon by petitioner to avoid this particular labor dispute because, as already stated,
petitioner itself has been claiming from the very beginning that the Club is only a division/department of the
hotel. Verily, retrenchment and not closure was effected to warrant the valid dismissal of respondents.
Petitioner has not totally ceased its operations. It merely closed down a department. Retrenchment is the
termination of employment initiated by the employer through no fault of and without prejudice to the
employees. It is resorted to during periods of business recession, industrial depression, or seasonal fluctuations
or during lulls occasioned by lack of orders, shortage of materials, conversion of the plant for a new production
program or the introduction of new methods or more efficient machinery or of automation.It is an act of the
employer of dismissing employees because of losses in the operation of a business, lack of work, and
considerable reduction on the volume of his business. All these elements were successfully proven by
petitioner. First, the huge losses suffered by the Club for the past two years had forced petitioner to close it
down to avert further losses which would eventually affect the operations of petitioner. Second, all 45
employees working under the Club were served with notice of termination. The corresponding notice was
likewise served to the DOLE one month prior to retrenchment. Third, the employees were offered separation
pay, most of whom have accepted and opted not to join in this complaint. Fourth, cessation of or withdrawal
from business operations was bona fide in character and not impelled by a motive to defeat or circumvent the
tenurial rights of employees. Neither is there a showing that petitioner carried out the closure of the business in
bad faith. No labor dispute existed between management and the employees when the latter were terminated.